PRESS RELEASE
Oklahoma Joins Feds in Crackdown on Internet Pyramid Schemes
 
For Immediate Release
Thursday, March 11, 1999 
 
Contact: Patty Labarthe, Enforcement Attorney
  Oklahoma Department of Securities
  405-280-7700
 
 
Oklahoma City/////  The Oklahoma Department of Securities has joined other state and federal authorities in a crackdown on illegal pyramid schemes on the Internet. The Federal Trade Commission, U. S. Postal Inspection Service, members of the North American Securities Administrators Association, 25 state Attorneys General, and local law enforcers announced a nation-wide law enforcement sweep today. State and federal officials announced 32 law enforcement actions (against 63 defendants) targeting Internet pyramids over the past year. The sweep included a two-day Internet "surf" to seek out sites that may be promoting illegal pyramid schemes. As the result of the surf, the FTC will send messages to the sites, identified in the two-day sweep, stating that pyramid schemes are illegal in the United States. Under Oklahoma law a pyramid promotional scheme is any plan or operation by which a participant gives consideration for the opportunity to receive compensation that is derived primarily from the person’s introduction of other persons into the plan rather than from the sale of goods, services, or intangible property by the participant or other person introduced into the plan. The sale of a product may be involved but is always secondary to the recruitment of new participants.

The FTC and state law enforcement offices have pledged to continue this sweep and will announce additional actions targeting Internet pyramid schemes in upcoming months.

"Unfortunately, the Internet makes it infinitely easier to perpetrate these old-fashioned pyramid schemes," said Irving Faught, Administrator of the Department of Securities. "The only people getting rich quick are the con artists. Ask yourself: If it's such a great money-making idea, why is someone telling 100,000 of their closest friends about it on the Internet?"

Internet surf days have been used to complement the existing law enforcement work of government agencies. Many enforcers have tried to ‘educate before they litigate’ using Internet surfs to inform web sites they may be in violation of the law. In conjunction with other federal, state, local and international law enforcement partners, the FTC has used surf days to target health care claims, credit scams and other frauds on the Internet.

In December 1996, four federal agencies and 70 state and local law enforcement officials from 24 states notified over 500 web sites that they believed were promoting illegal pyramid schemes in violation of state and federal laws. Many of the sites closed down. Others modified their claims. The FTC and federal and state law enforcers took legal action against others.

Faught said "Consumers should:

Avoid any plan that offers commissions for recruiting additional distributors;
Beware of plans that ask new distributors to spend money on high-price inventory;
Be cautious of plans that claim you’ll make money through continued growth of your "downline" recruits, instead of sales;
Beware of plans that promise enormous earnings or claim to sell "miracle" products;
Beware of shills or decoy references used to promote the plans."
Here’s how to get information on pyramid scams. The Oklahoma Department of Securities Home Page and Investor Alerts at http://www.securities.state.ok.us. The North American Securities Administrators Associations (NASAA) has published "Get Rich Quick Self Employment Scams" available at http://www.nasaa.org/investoredu/ and from NASAA, 10 G Street NE, Washington, D.C., 20002. The FTC’s "Profits In Pyramid Schemes? Don’t Bank On It" is at http://www.ftc.gov and is available from the FTC’s Consumer Response Center, Room 130, 600 Pennsylvania Avenue, N.W., Washington, D.C. 20580; 202-FTC-HELP (202-382-4357); TDD for the hearing impaired 202-326-2502.
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This press release, and related information, is available on the Securities Commission's web site at securities.ok.gov, by phone at (405) 280-7700, or in writing at:  Oklahoma Securities Commission, 204 North Robinson, Suite 400, Oklahoma City, OK 73102.